As flood risk changes, many communities brace for insurance rate shock

While the National Flood Insurance Program’s new way of setting flood insurance premiums better reflect a property’s flood risk, lawmakers say the significantly higher rates for some properties could discourage people from buying insurance.

Debra Coombs is overcome with emotion as she visits her apartment after flood waters inundated it when Hurricane Idalia passed offshore Aug. 31, 2023 in Crystal River, Florida. Hurricane Idalia hit the Big Bend area of Florida as a Category 3 storm and caused flooding along the Gulf Coast.

Debra Coombs is overcome with emotion as she visits her apartment after flood waters inundated it when Hurricane Idalia passed offshore Aug. 31, 2023 in Crystal River, Florida. Hurricane Idalia hit the Big Bend area of Florida as a Category 3 storm and caused flooding along the Gulf Coast. Photo by Joe Raedle/Getty Images

Earlier this year, much of Valley City, Illinois, was underwater because of another flood from the Illinois River. According to a news report, the town, which has a history of flooding, appeared “like a ghost town.” 

After the Federal Emergency Management Agency made changes to how it sets premiums for the 5 million policyholders in its federal flood insurance program, homeowners in Valley City, an area that’s hit a major flood stage seven times since 2002, will be seeing a major jump in their premium to cover their damages. 

Over roughly the next ten years, the 91 single-family homeowners in Pike County, where Valley City is located, will see their premiums rise six-fold from $699 to $4,933.

Under changes that have been implemented over the last year, FEMA says premiums will now more accurately reflect how much flood risk properties are facing. But in many areas around the country, homeowners will see their premium payments multiply several times.

In addition, people buying the insurance for the first time will immediately be paying several times more than their neighbors. WUSF reported earlier this year that South Floridians in particular should "brace for a few years of flood insurance rate hikes ... doubling, even tripling for thousands of homeowners."

"For the worst-hit ZIP code in South Florida — 33469, a stretch of coastal Palm Beach County that covers parts of Jupiter and Tequesta — that will mean a 342% premium increase, on average," WUSF reported. "In the most expensive ZIP code for flood insurance in South Florida — 33149, which covers Key Biscayne — average premiums will rise north of $7,000 a year."

Up until now, the premiums had not considered how often an area was expected to flood in the future, and didn’t consider many types of flooding, like that from heavy rainfall.

That’s led to an unfair situation in which many owners of properties at risk of flooding have been paying “peanuts,” said Chad Berginnis, executive director for the Association of State Floodplain Managers, in an interview.

And indeed, Pike County’s single-family homeowners had been paying among the lowest rates of any county in the country, according to FEMA data examined by Route Fifty.

Meanwhile, properties that have a “lower flood risk have been paying too much ” Laura Lightbody, director of the Pew Charitable Trust’s energy modernization project, wrote in a blog post last year.

But in a debate that will be played out over the next month in Washington, D.C., some members of Congress from areas where premiums will jump are balking at the prospect of NFIP policyholders paying thousands more for federal flood insurance.

Raising premiums so sharply, they say, could discourage people from buying insurance and leave them vulnerable if a flood damages their home.

Pike County is not alone in facing a sharp increase, according to FEMA data for single-family homes. The 2,413 property owners with NFIP policies in Louisiana’s Plaquemines Parish on the Gulf of Mexico are facing premiums that will grow by six times from $842 to $5,431.

And the 2,352 households with policies in Louisiana’s coastal St. Mary Parish will see their premiums grow over the next few years from $1,074 to $5,226.

In contrast, NFIP policyholders in the District of Columbia, which is not considered to be facing much flood risk, will see only average premium increases of $3 to $407, or by less than 1%. 

The sharp increases facing property owners in some parts of the country will not happen at once. Federal law caps premiums increases at 18%. Those who are not paying as much as FEMA’s new risk assessment says they should be paying will be on what the agency calls a “glide path” until they reach their new premium level.

The agency estimates that the percentage of people paying the amount FEMA believes they should be paying will rise from about a third to 90% over the next decade.

The issue will come up with Congress needing to approve by Sept. 30 legislation to continue providing the insurance.

A bipartisan group of lawmakers, representing areas expecting big increases, are pushing to cap how much premiums can grow each year at 9%, spreading out the increase over a longer period of time.

Their measure, which would approve continuing the insurance program for another five years, would also create a subsidy for low- and middle-income homeowners.

“We need to ensure families are not priced out of the program,” said Sen. Bill Cassidy, a Louisiana Republican, who is proposing the change in a Senate bill with New Jersey Democrat Bob Menendez.

“FEMA’s Risk Rating 2.0 is lowering costs for some, but it’s causing thousands of households to drop coverage altogether due to rate shocks,” said Rep. Frank Pallone, a New Jersey Democrat, who is proposing the cap in the House version with Rep. Clay Higgins, a Louisiana Republican. 

Pallone represents the Jersey Shore, including Monmouth County, where 9,406 policyholders are looking at seeing their premiums double from an average of $962 to $1,900, according to FEMA data. 

The proposal has the support of the National Association of Counties, in part because it would create certainty for policyholders by continuing the insurance program for at least another five years.

In addition, the bill “caps annual premium increases and incorporates affordability provisions for low- and middle-income policyholders—provisions that ensure greater access to flood insurance,” NACo’s Executive Director Matthew Chase said in a statement.

However, the prospects for limiting the increases are uncertain. 

Rep. Warren Davidson, an Ohio Republican who chairs the House Financial Services subcommittee on insurance, blamed Democrats at a hearing in April for not scrutinizing the program while in the majority.

Davidson said the committee would need more time to “do a deep dive into flood insurance reforms, conduct additional hearings on the NFIP, engage stakeholders and craft a new 5-year reauthorization bill with reforms.”

To give lawmakers time to do a “deep dive” into the program while not letting it lapse, he is proposing to continue providing the insurance until the end of next year, without making any changes.

Davidson’s state, however, is not one of those looking at big premium increases as other parts of the country. Ohio’s premiums would rise by $420, or an average of 47%, over the years. Spokespeople from the committee did not respond to requests for comment.

In addition, taking a more detailed look at the risk of flooding has its supporters. Some changes should be made, said Berginnis of the Association of State Floodplain Managers. The new premiums, for example, will not take into account steps property owners take to reduce the threat of flood damage.

Still, he said, the new flood insurance rates will “send people the correct signals about flood risk.”

Under the old system, he said, rates were based on factors like whether a property was in an area was expected to be flooded in a 100-year storm and how high the elevation was. 

“One of the things that the new rating system recognized is that flooding occurs in a lot more places than just where the 100-year floodplain is,” he said. “We have we have lots of different kinds of flooding in this country.”

In addition, the previous way FEMA assessed the risk of flooding did not consider differences between properties in the same flood area, Pew’s Lightbody wrote.

“The more detailed analysis allows for prices that run along a sliding scale—for example, setting different, risk-based rates for a riverfront home and one on a hilltop nearby—rather than grouping those two homes at the same rate simply because they’re in the same mapped zone,” she wrote. 

In addition, while premiums would go up for some, Lightbody wrote that they will go down for nearly 1.2 million homeowners and lead to smaller increases in some states compared to others based on the risk of flooding.

While increased flooding around the country will more than double the average premiums nationally in the coming years—from $888 to $1,808—it will go up by much less in many states under the new method, according to FEMA data. 

In addition to Washington, D.C.’s $3 increase, the average premium in Maryland, for example, will rise by only 22%, or by $134, to $742. In Michigan, premiums will rise by $257, or by a third, to $1,068, which is far less than the 183% increase for single-family homeowners in Maine or the 171% jump coming for West Virginians.

Maryland Democratic Sen. Chris Van Holleen, though, has supported lowering the cap on increases.

“Like the rest of the country, communities across Maryland are feeling the impacts of flooding caused by more frequent and extreme weather events,” he said in a statement. “That’s why we need to reform this program— to ensure families and businesses across the state have access to affordable coverage and our flood maps are up-to-date,” 

In Louisiana, Republican state attorney general Jeff Landry called the changes “arbitrary and capricious” in a lawsuit he filed in June with nine other states. According to a fact sheet, Landry claimed the higher rates in the state would lead to fewer people choosing to be insured, “creating greater risk exposure for Louisiana and its citizens.”

Forty-three local Louisiana parishes also joined the suit. Matthew Jewell, president of St. Charles Parish, told local television station 4WWL that the coming premium increases will deter some who left the area after their homes were damaged by Hurricane Ida in 2021 from returning and instead decide to “just sell that home and move somewhere else.”

Kery Murakami is a senior reporter covering Congress and federal policy for Route Fifty, where a version of this story was first published. He can be reached at kmurakami@govexec.com. And follow @Kery_Murakami on X. 

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